Apple’s margin squeeze has no easy fix amid 33% share drop

Apple is also seeking new customers in China, where it will be harder to charge premium prices. New products such as the iPad mini are also being priced at relatively lower points, eating into margins.

Gross margin, or how much Apple earns after paying for raw materials, labor and production to build iPhones, iPads, Macs and other products, is projected to decline in fiscal 2013, according to the company’s Jan. 24 filing with the U.S. Securities and Exchange Commission.

It predicted gross margins for this quarter would be 37.5% to 38.5%, down from 47% a year earlier. The two new products that Apple will probably introduce this year, a television and a lower-priced iPhone, will be much less profitable and drag down margins, according to Morgan.

Cash Plan

After Apple on Jan. 23 reported its slowest profit growth since 2003, more than 20 analysts lowered their price targets. While Cook made it clear on the earnings call that he’s not considering any major strategic shifts, he promised that Apple was developing several new products.

“We’re working on some incredible stuff, and the pipeline is chock full,” Cook said. “We feel great about what we have in store.”

Apple said on Feb. 7 that the board and management are considering Greenlight’s proposal and are actively discussing disbursing more money.

Apple’s cash balance includes $16.2 billion of cash and $23.7 billion in short-term investments. The rest is invested in long-term marketable securities.

“We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value,” Apple said in a statement.

That suggests Apple is softening its stance on the preferred shares, after previously saying in its annual proxy that there aren’t any plans to issue them.